Behind Google’s $500 Million Settlement With U.S.

Joe Giblin/Associated PressThe investigation was led by the U.S. attorney’s office for the District of Rhode Island, headed by Peter Neronha, and the F.D.A.’s Office of Criminal Investigations.

The Justice Department’s settlement of a criminal investigation of Google for allowing Canadian pharmacies to advertise drugs for distribution in the United States reflected an effort by prosecutors to extend the reach of federal drug laws. This may present future challenges to Internet search companies over their advertisements.

Google entered into a nonprosecution agreement with the government last week over the use of its AdWords program by Canadian pharmacies that helped them sell prescription drugs in the United States in violation of a federal law, 21 U.S.C. § 331(a). That law prohibits causing the “introduction or delivery for introduction into interstate commerce of any food, drug, device, tobacco product, or cosmetic that is adulterated or misbranded.”

Google agreed to forfeit $500 million, representing both its advertising revenue from the Canadian pharmacies and the revenue the pharmacies received from American customers buying controlled drugs. The company also agreed to enhance its compliance program for drug advertising.

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For Google, the settlement puts an embarrassing investigation to rest and eliminates a distraction while it pursues its $12.5 billion acquisition of Motorola Mobility. By styling the settlement as a nonprosecution agreement, the company will not have a criminal record once it complies with the terms.

The Canadian prescriptions sold to American customers were considered “misbranded” under the statute because they were not approved by the Food and Drug Administration. In some cases, the drugs were obtained from countries other than Canada that lacked adequate regulation of pharmacies.

Mario Anzuoni/ReutersLarry Page, chief executive of Google.

The United States attorney for Rhode Island, Peter F. Neronha, whose office was responsible for the investigation, said Google’s conduct was not the result of a few rogue employees, according to The Wall Street Journal. Mr. Neronha said the company’s chief executive, Larry Page, “knew what was going on.”

The statute prohibits the “introduction or delivery” of the drugs, but Google was not involved in any way in their actual transfer into the United States, which is the usual means of proving a violation of the statute. Instead, the Justice Department viewed Google as an accomplice to the crime by enhancing the ability of the Canadian pharmacies to reach American consumers.

Can a search engine be held responsible for how consumers use the products or services allowed to be advertised on it? That question goes to a core issue in the criminal law regarding the responsibility of suppliers for the use of products they sell.

There were negligence lawsuits in the early 1990s against Soldier of Fortune magazine for advertisements it ran for people willing to engage in criminal acts, including murder. These cases were brought by victims of attacks and involved a question about whether the magazine published ads that were a “clear and present danger” to the public, and therefore unprotected by the First Amendment.

Unlike a private lawsuit alleging negligence, the Justice Department’s nonprosecution agreement with Google involved an assertion that the company aided a criminal violation — i.e., that it was an active participant in a crime.

To prove accomplice liability, the prosecution must show the defendant provided some assistance in the commission of the crime, which can include counseling or encouraging the offense. There is a fine line between supplying goods that are later used for the commission of a crime and actually assisting in its completion.

Even if one does furnish some measure of assistance, the law further requires that the accomplice be aware of the user’s intention to commit a crime and intend to give some assistance or encouragement in its completion.

The Justice Department’s position in the Google case emphasizing the awareness of its chief executive shows it took an aggressive approach about what can constitute aiding a violation of the drug importation laws.

Google was not involved in the actual movement of the prescriptions, but the government viewed its role as sufficiently important to the success of the Canadian pharmacy sales that it was similar to someone who actually supplied or shipped misbranded drugs.

The fact that the case was resolved by a nonprosecution agreement can be seen as an indication that the Justice Department understood its position on accomplice liability could be open to challenge if criminal charges were filed in court.

Unlike a guilty plea, this type of resolution does not require any judicial approval, so a judge will not question whether the conduct rose to the level of aiding and abetting a crime.

Google’s $500 million payment was labeled as a forfeiture of the revenue that both the company and the Canadian pharmacies received, not a criminal fine or civil monetary penalty. While Google paid out that money, it did not experience any additional monetary punishment for its conduct.

The Internet allows messages to be better focused on particular groups of potential customers. With that ability comes the growing possibility that the Justice Department will view search engines as more than mere passive conduits of information, and instead as potentially active participants in conduct that may violate the law.

Correction: August 31, 2011An earlier version of this post misstated what Google's $500 million settlement represented. The company forfeited money that represented both its advertising revenue from Canadian pharmacies and the revenue the pharmacies received from American customers buying controlled drugs, not just Google's ad revenue.